Question
X Company currently buys a part from a supplier for $13.18 per unit but is considering making the part itself next year. This year, they
X Company currently buys a part from a supplier for $13.18 per unit but is considering making the part itself next year. This year, they purchased 3,200 units of this part; next year, they think they will need 3,600 units. Estimated costs to make the part are:
Per-Unit | Total | ||
Direct materials | $2.71 | $8,672 | |
Direct labor | 4.17 | 13,344 | |
Variable overhead | 4.00 | 12,800 | |
Fixed overhead | 4.60 | 14,720 | |
Total | $15.48 | $49,536 |
Of the estimated fixed overhead, $6,771 are common costs that would be allocated to the part; the rest would be additional fixed overhead costs. X Company currently rents unused factory space for $2,900; it will have to use this space to make the part. If X Company continues to buy the part instead of making it, it will save ___________
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